5 ways co-ops improve economic growth

Groups or communities looking to take wealth and employment creation into their own hands should know that co-ops improve economic growth.

Often created and owned by the people benefitting from them, co-ops improve economic growth by addressing specific local challenges and opportunities. Plus, the versatility and unique benefits of the model mean it’s a good idea to make considering a co-op a part of the economic development toolbox in rural and remote communities.

Here are five ways the co-op model is a great fit for promoting economic growth in rural and remote communities.

The Model is Flexible

The co-operative model can apply to businesses in any sector, and co-ops can improve economic growth with this flexibility. For communities lacking basic amenities or infrastructure, like a local grocery store or broadband internet, the co-operative business model provides a particularly good option.

The Alaska Village Electric Co-operative provides electricity to 58 remote communities, most of which are not accessible by road. In Alberta, electrical co-ops created much of the electrical infrastructure in rural areas of the province, and some of these businesses still exist, like Battle River Electrical Co-op. Alberta also currently has over 170 water co-operatives helping ensure rural residents have access to potable water for both residents and livestock.

Broadband internet, much like power at the beginning of last century, is necessary infrastructure for economic growth. To compete with their urban counterparts, rural and remote communities need access to high speed internet. To address this challenge, some small communities are turning to co-ops to help bring broadband infrastructure to their communities. Lawrencetown Community Development Co-operative provides one example of this. Park West Fibre Optic Co-op, a partnership between 3 municipalities and a school division in Manitoba, provides another innovative (and first of its kind) example.

Bottom-up development

Rather than being developed by outside interests, co-operatives tend to be created by groups of people who see a need for a good or service in their community, and work together to realize that opportunity.

Like locally-owned small business, this way of developing business is more likely to inspire a feeling of community ownership and support. The loyalty local ownership creates can make a co-op a more sustainable way to grow economic development and offer a degree of sovereignty in rural or remote areas.

Plus, decisions about the business’ future remain locally driven as a co-operative is less vulnerable to the kinds of hostile takeovers or changes in management that could remove the business, service and jobs from the community.

Money Stays Local

For rural and remote communities lucky enough to attract the investment of large corporate players and have corporate branches operating in their community, the downside is profits made by corporations and other businesses headquartered outside communities means wealth is leaving the community – especially in industries like retail.

Not so with a local co-operative.

Co-ops generally use profits to benefit local shareholders and in many cases the community directly. Some choose to issue dividends or a patronage payment to their shareholders or members, which is money that stays in the pockets of those living in the community. Co-ops may add jobs or invest in assets for the business, which increases both wealth and economic activity. Plus, a portion of co-op profits are often invested back into their community by supporting local organizations and projects, such as sports teams, playgrounds or community services.

For rural and remote communities, seeing profits retained rather than siphoned off by external companies is important. Keeping the limited wealth entering rural and remote communities in the community is key to building on local wealth and increasing economic activity overall.

Employment

Another way co-ops improve economic growth is through their capacity to create jobs. In fact, sometimes co-ops are developed specifically for that reason, and they provide a great option to larger businesses closing or declining local industries.

The Fogo Island Co-op in Newfoundland was created in the 1960s by fishermen committed to staying in their home community rather than seeking employment on the mainland. The co-operative built boats and took over proc

essing facilities that had been left behind by private companies, and still exists today to support local fish harvesters.

Builds community capacity

Having alternative governance structures in small communities increases engagement, leadership and professional skill sets. Co-ops frequently provide educational opportunities and training for members, employees and directors on the board.

Plus, simply being involved in a co-operative — especially as a member of the board — helps shareholders develop communication, problem-solving and management skills. And this means having a co-operative builds the leadership capacity of the community.

Happy co-op building! If you’re in western Canada and want to explore an idea, contact us.